India-Bhutan Agree on Power Tariff For Mangdechhu HP Project

India and Bhutan have agreed on the contentious issue of tariff for the electricity generated from the soon to be inaugurated 720 MW Mangdechhu hydropower project in central Bhutan. This was announced by Prime Minister Narendra Modi during his speech following his meeting with visiting Bhutanese PM Dr Lotay Tshering on Friday.

PM Modi also announced India’s commitment to allocate to Bhutan Nu 45 billion (Rs 4,500 crore) for its 12the Five Year Plan. The same amount was allocated by India to Bhutan for its 11th FYP.

New Delhi had been expecting an increase in the Plan allocation sought by the new government particularly given its emphasis on ‘Narrowing the Gap’ which was the electoral pitch of Dr Tshering’s party, the Druk Nyamrup Tshogpa (DNT).

The agreement on the per unit cost of electricity from this project is learnt to have been agreed upon during a meeting last night between Indian and Bhutanese officials. The Bhutanese PM, on his first visit to India after being elected his country’s PM in October, arrived here for a three-day state visit on Wednesday.

White it’s not clear yet what tariff rate has been agreed upon by both sides, several rounds of negotiations had been held to arrive at a figure agreeable to both sides. Bhutan, initially pitching for a rate of Rs 4.40 per unit of electricity had later brought down the rate to Rs 4.27 per unit.

With New Delhi and Thimphu having agreed on the per unit price, the two sides will now formalise the decision by finalising a tariff protocol. The dam itself is slated for inauguration some time in late January or early February and the Bhutanese PM expressed the hope that PM Modi will travel to Bhutan for this.

Hydropower cooperation is an important and integral part of bilateral relations. Tariff rates are important as they earn revenue to enable Bhutan to return both the loan and the interest on it to India. In the case of Mangdechhu, Bhutan will have to start repaying the loan one year after its commissioning and will have a 15 year period to clear the loan.

The Mangdechhu project, once commissioned, will be the second largest HP project in Bhutan. The 1,020MW Tala hydropower project in western Bhutan is the biggest joint hydropower project between India and Bhutan so far. The Tala project was commissioned in 2006 and the per unit cost of electricity generates from this project is pegged at Rs 2.12. PM Modi

In his speech, PM Modi also assured his Bhutanese counterpart that India wil always “play the role of a trusted partner and friend in the development of Bhutan.” He also said that three Bhutanese PM’s vision of ‘Narrowing the Gap’ was in consonance with his vision of ‘Sabka Saath, Sabka Vikas’.